What To Know about blockchain


Have you been looking for a plain English explanation of blockchain?   There’s a lot of confusion about it. That’s understandable because blockchains are a complex, moving target.  We could talk about it for a year and still not cover everything.

Let’s have a look at how it’s sometimes explained. SNL skit

What could be simpler than that?  Any questions?

That’s a funny clip because it’s a fine explanation if you’re for a computer programmer.  It doesn’t mean much to the average person.

I’ll include a link to the whole clip in the show notes, it’s good for a laugh.

I work as an IT management consultant.  I get paid for my perspective and I like solving tough problems.

Have you noticed that people sometimes mix up technology terms?  For example,  you’re using the internet and the world wide web to watch this Youtube video.  Maybe someone emailed you a link to this video.  Email and the web are applications that run on top of the internet.   Email could disappear and we would still have the internet.  The world wide web could disappear and we would still have the internet. If the internet disappeared, we would not have email or websites.

Blockchain and bitcoin are sometimes mixed up as well.  Bitcoin is the currency everyone and his brother is talking about.  If bitcoin were to become worthless, we would also lose the bitcoin blockchain.   I predict that will never happen, but even if it did we’d still have the idea of blockchain.

I already created a show for you about bitcoin.

This one is about blockchain.

It took a genius to come up with it. The good news is that you don’t have to be a genius to use it.

By 2025, you’ll be using blockchain technologies and be no more aware of it than the internet technologies that you are using to watch this, TCP/IP, SSL and HTML.

I graduated from Sheridan College with a computer science diploma.  I learned how to program linked lists, hashes, merkle trees and how to use asymmetric public key cryptography.   Computer programmers care about those things, but that’s our job.  Until this year, none of those topics ever came up in polite conversation.

In 2009, Satoshi Nakamoto built on those ideas, and others, to create the bitcoin implementation of blockchain.  He was the first to solve the Byzantine generals problem.  For people like me, it’s exciting. For the average person, it’s meaningless.

This What to know show is the introduction to blockchain that I wish I had when I got started.  I’ve studied the literature, read the code, watched the Princeton University lectures.  I’ve identified the leaders in the field and listened to them.   I’ve done all that work so you don’t have to.

Here’s the thing to remember.  It’s not just another database, it’s a network for money, a protocol for trust that will support billions of people increasing their wealth.

A protocol is a set of rules you can follow, you don’t need anyone’s permission.

To be fair, if you don’t know an indexed file from a SQL database, then we’re done.  I’ve just taught you everything you need to know about blockchain.  You’re welcome.

That would make for a short video.

There’s a lot more to it.  If you’re curious like me, keep watching.

Have you noticed that the terminology around computers seems like it was designed to mislead you?

I created a video about passwords that I encourage you to watch.  The one thing you should know about passwords is that you should never use a word as your password.

In blockchain, there’s a process called mining, but nothing is being dug out of the ground.

There’s something called a coin, but they are actually entries in a ledger.  No physical coin exists.

There are cryptographic keys.  Like a door key, they give you access, but, unlike a door key, a cryptographic key can’t be replaced if you lose it.

Think of cryptographic keys like $100 bills.  If you lose the bill you’ve lost $100.

But, don’t let all that put you off.  There’s something very valuable here.

Blockchain means that, WE, the people, have a new way of working together.

I create reliable computer systems to support my clients business and this is another tool I can use.

Here’s one way that it’s different.

Every document you’ve ever created has what I call CRUDability.

So, what’s that?

C is for create, you can add to your document.

R is for read, you can read your document

U is for update, you can make changes to sentences that are already there

D is for delete, you can delete words that you don’t want.

Blockchain does not have the ability to update or delete information.  We can only add to the chain, create, and read it.

Thanks in part to that restriction, it’s the most secure and resilient database on the planet.  It’s been 100% available since it’s creation.

The longer your data exists in the block chain, the more difficult it becomes to change it or delete it.  Once a day has passed, it’s essentially permanently recorded.

Another fundamental difference is that it doesn’t rely on access control to keep itself secure.

Ok so what do I mean by that?

Blockchains flip our traditional security models.  Every thief in the world can access it.  The blockchain doesn’t care who you are or what information you put in it, as long as you do it in a valid way.

There’s a very old saying, garbage in, garbage out.  GIGO

I’ve spent much of my career making sure garbage doesn’t get in. GDGI

That’s important because whatever you put in a blockchain stays there.

Here are the 2 main things to remember.

1. We now have a way of agreeing on the contents of a database without anyone being “in charge” of it

2. We now have a way of compensating people for helping make that database more valuable, without a central authority paying them.

Now, I know what you’re thinking.

Not to be impolite, but, “so what?”

That’s what I thought the first time I heard this.  Banks, credit card companies and cash work for me.

Then I learned that blockchains don’t need banks.  Again I thought “So what?”

They’re reinventing the wheel.  We already have banks and the system works.

Except when it doesn’t.   Banks can collapse, currencies can fail.  The people of Venezuela are suffering  through that right now.

We have it pretty good in North America.  But there are countries where millions do not have a government issued identity, they can’t open a bank account, they can’t get loans or establish property rights.

It’s not obvious, but blockchain opens up all kinds of possibilities.

It offers technological alternatives to the institutions that our society is built on, banks, insurance, legal and social structures.

Eventually, you won’t need a bank account, you will have the services of a bank in your phone.

Right now, there are thousands of development projects, experiments really, to do something useful with this technology.

For example

My wife sends money from Canada to her family in the Philippines.  We have to withdraw cash from the bank then go to a remittance office like Western Union to send it.  We can’t do a simple bank transfer from my account to their account.  Then they have to go pick up the money.  The transaction cost is around 5% to 9% plus everyone’s time involved.

From start to finish it takes about 4 days.

Blockchain makes it possible to transfer currency directly and instantly, for a tiny fee.

That’s a big deal because $10 is a days pay in the Philippines.  The millions of dollars Filipinas spend every year in fees could instead go directly to their families.

Blockchain is the most secure database I’ve ever seen.

If hackers could find a flaw, they could steal billions.

Today, Blockchains are like Fort Knox, if it was surrounded by thieves.

To move money in and out of a blockchain, most people trust an exchange to do it.  The central exchanges are not yet as reliable or regulated as banks. When it comes to your money, you want it to be secure.  What’s the point of using a bank if you’re going to get mugged as you leave?

That’s one of thousands of problems that will take us years to solve.

Let’s talk about the impact on society.

Historically, there have been a few ways of organizing large groups of people.  Monarchies and Aristocracies dominated early human history.

About 400 years ago we got our first public company. It was only about 200 years ago that democracies started to really take off.

More recently, during my career, programmers figured out a way of working together to create and maintain complex products, over the internet.  It’s called open source projects and about 30 million programmers have worked with it.

The blockchain builds on those ideas to create a new way of working together that will eventually reach billions of people

Blockchain creates a market where we can contribute resources, achieve consensus and trust each other, on the internet, even though we don’t know each other and are unable to easily punish bad behaviour.

That is a significant accomplishment.

Imagine an internet with accountability, safer to use, no spam,

no privacy invasions, no anonymous threats.

It will take a lot of work to achieve it, but it will be worth it.

The people who will benefit most haven’t even been born yet.

This is going to be great.  The best is yet to come.

My thanks to Susan from Paint and Cocktails for requesting this show.